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Exhibit 10.12

PROPOSED TERMS FOR BERNARD L. HENGESBAUGH

Subject to approval of CNAF Board which is expected to occur prior to August
26, 2002, CNAF (CNA) and Bernard L. Hengesbaugh (BLH) agree as follows:



|1. |  | BLHs employment with CNA shall terminate August 26, 2002. Such
termination is for convenience under Section 6.3 of Amended Employment
Agreement made as of February 4, 2000 (Agreement) and BLH shall be
entitled to receive the payments and benefits described in such section.
The parties agree that the amount payable to BLH pursuant to Section
6.3(c) shall be $250,000.00.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|2. |  | Commencing August 26, 2002 through February 28, 2004, BLH shall serve as
a consultant to CNA and shall perform services in the area of government
and external affairs. BLH shall receive $1.665 million in cash
compensation for this 18-month service period payable semi-monthly. In
addition, during this service period, BLH shall receive (a) life,
disability, medical, dental and vision and tax services benefits covering
BLH or his spouse to the same extent they currently are provided such
benefits; (b) reimbursement for annual dues, membership fees and
assessments for clubs with respect to which he is currently reimbursed by
CNA; (c) have use of CNA offices at Downers Grove, which shall serve as
BLHs principal office, as well as CNAs 333 South Wabash location (with
paid parking thereat) and shall have use of the services of his assistant
Ann Dwyer; and (d) shall be entitled to reimbursement of his expenses
incurred on CNA business, in accordance with the general expense
reimbursement policies of CNA, provided, however, that no extraordinary
expense shall be incurred by BLH without prior approval of CNA CEO or CFO.
BLH shall have the right to elect COBRA coverage effective February 28,
2004.





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|3. |  | It is expected that commencing August 26, 2002 and through February 28,
2004, BLH shall be elected and serve as the Chairman of the Board of
Directors of CNA.
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|  
|4. |  | BLH shall have until February 28, 2007 in which to exercise stock options
held by BLH; otherwise Section 6.3(d) of Agreement shall be unaffected.             
|  
|5. |  | Nothing in this agreement shall limit any rights that CNA or BLH may have
under any other agreements, except as provided herein.                              

|                                                               
|---------------------------------------------------------------
|/s/ Bernard L. Hengesbaugh
Bernard L. Hengesbaugh,
Individually
|                                                               
|/s/ Jonathan D. Kantor
Jonathan D. Kantor
On Behalf of CNAF    
|                                                               
|July 24, 2002